HOW TO LEGALLY STEAL BILLIONS OF DOLLARS IN CANADIAN FINANCE, presented in seven minutes to a Justice and Human Rights Committee in Ottawa December 9th, 2009, by Larry Elford, investment industry whistleblower and twenty year veteran of the indsutry.

I am here to tell you how to commit the perfect crime, with the help of C-52.

If I were to rob a financial institution in Canada, I am subject the the penalties of the Criminal Code of Canada.

If a financial institution, however, robs Canadians using any one of a thousand methods I witnessed while working for them, they are not even subject to the penalties of this proposed bill.

They are more likely to fall under the protection of securities commissions in thirteen provinces and territories than be prosecuted. Most of the time independent police agencies are not even notified. Not invited to act and not welcome.

I worked in the financial industry for twenty years. I found it nearly impossible to hold a discussion about ethics and honest treatment of customers, so strong was the culture and addiction to sales, commissions and bonus’s.

Most Canadians however, are of a mistaken impression that our financial institutions are so trustworthy as to be “above examination”.

I would like to challenge this dangerous conventional wisdom and go so far as to call it a form of collective insanity.

Most Canadians have also been sold a story that our Canadian financial institutions are the worlds strongest. While that may in fact be true, It ignores the possibility that they may be the world’s strongest because they are legally allowed to be predatory and they are protected from real competition and true examination in Canada.

It ignores millions of dollars that I watched being skimmed from Canadians investment returns by predatory sales practices, dressed up as investment advice. Damage that cuts the retirement of the average Canadian investor by half.

It ignores billions of dollars in damages every year from having a system designed to place the interests of financial institutions ahead of their customers. A system we do not speak of, but exists in actual practice.

It ignores investment frauds that are penalized by authorities in the United States, while here in Canada similar abuses are considered “standard industry practice” and continue to harm Canadians daily.

It ignores hundreds of billions in damages by companies like Nortel, Global Crossing, Enron, Eatons and a thousand others that were used in some way to fatten investment bankers, lawyers or CEO’s at the expense of your financial security.

Financial abuse by the institutions that we trust is costing Canadians more money each year than the cost of every other crime in the country combined. Source www.breachoftrust.caAnd yet we act like good Canadians, and praise our financial institutions for being among the strongest in the world. That is like praising the schoolyard bully for being so well fed after he has stolen everyones lunch.

Let me reveal just four simple ingredients I found in our financial system, that allow billions of dollars of financial abuse and corruption.

The first ingredient in making crime pay is having the ability to ....self regulate, to have our own “in house” policing system and to use this system to often bypass real criminal investigation and prosecution. Part of this includes Securities commissions and thirteen of them across the country act more and more like the corrupt sheriff in every Smokey and the Bandit movie I have ever seen. “They feel they are above examination”

The second ingredient is that the financial industry pays the salaries of the regulatory force, rather than the taxpayer. This means that clever financiers get to choose who to hire to regulate financiers. Imagine if you were a criminal mind and you had the ability to “choose” who you wanted to “police” you?

3. The third ingredient in making financial crime pay is to pay them about triple what they would earn in the same job elsewhere.

The head of the SEC in the USA has a salary that is capped at $162,900.The thirteen securities commission heads in Canada, are paid as much as four times this amount. I am told that there once were 90 staff members at the Ontario Commission alone who were each paid more than the top man in the entire United States.

Over paying makes regulators highly “compliant”, conflicted, and more willing to say “yes” to the financial industry. The Canadian public does not pay their salary, and members of the public are not usually even allowed in the front door of any securities commission in Canada. They are instead sent to non government industry groups where they are spun around by an industry-run kangaroo court process. The public will generally not be helped, but simply abused a second time. Please, don’t take my word on this. Ask any abused investor.

Last but not least if you were shopping for a list of ingredients required to make financial crime pay.............. is the ability to buy permission to violate the law. 13 securities commissions, acting in concert will allow any financial institution in the country to violate our laws, simply by filing an application to do so. I have in my hand a list of several thousand such legal permissions that have been granted without informing the public about a single one. This is the greatest gift you could possibly ask for as a criminally minded financier, to be able to break any law you wished in pursuit of profits.

Finally, we come to the helpful effects of Bill C-52. Marlene Jennings is be be thanked for spotting yet another legal gift given to the financial markets industry. The bill specifically excludes public markets fraudsters anywhere that I can see in this bill, even though they are in the criminal code. What a wonderful gift the writers of this bill have given, yet again, the financial markets of Canada. We can continue to hide our crimes inside our private regulatory system, with no outside oversight or interference.

We can continue to pay their salaries while picking and choosing who and why we hire each and every one of them. We get to hand pick our securities police.

We can continue to pay them triple or more, what they could earn in any similar position elsewhere, making them completely beholden to us, the people they are supposed to regulate.

We can continue to count on them to allow us permission to violate Canada's securities laws, any time we need to, for any reason, without ever having to explain this to the Canadian public.

And now, as a final parting gift, some legal friends of the system have given public markets, virtually every investment crime committed in Canada, a compete free ride around the punitive effects of this bill.

As professor Bill Black at the University of Kansas correctly points out, “our financial servants have become financial predators”. And Bill C52 as it is written gives us just one more example of how wide reaching is the influence of financial predators in Canada.

End

Primary research for this presentation comes from the collective experience of hundreds of industry professionals, and can be found in three major sites:

Case study #1, Request for Commission of Inquiry into legal exemptions and regulatory failure in the case of commission kickback exemptions granted to Assante mutual funds.

Case study #2 Request for the RESIGNATION OF ALBERTA FINANCE MINISTER and a Commission of Inquiry into legal exemptions granted to allow sale of toxic Asset Backed Commercial Paper. Some background is found at www.investoradvocates.ca under the forum topic “The ABCP’s of how to steal $32 billion”

I am writing on behalf of approximately 1800 Canadians who have hadtheir savings frozen as a result of the collapse of Canadian non-bankasset backed commercial paper (ABCP). As you may have read, this"savings product" was sold to retail clients of Canaccord Capital,Credential Securities, Scotia Capital (wholesaler), National BankFinancial and others. Some of us were sold this product without ourknowledge or consent; others were assured it was as trustworthy asGovernment of Canada T-bills, it was supposedly backed by a banksponsored liquidity agreement (like a bank guarantee) and it paidcomparable interest rates to a GIC or T-bill. This was reputed to bethe type of secure product in which Canadians could place their moneyfor periods of 30 to 60 days in the course of carrying out activitiessuch as paying for their retirement or temporarily storing money in theperiod between selling one house and purchasing another.

This lengthy email tries to explain the national, and potentiallyinternational, significance of the ABCP crisis and how the proposedrestructuring arrangement will improperly affect the rights ofindividual Canadians owning ABCP. The NDP missed an opportunity lastweek to be seen to be sponsoring the proposed Federal Finance Committee(FINA) investigations into the Canadian ABCP fiasco. However, there isstill an opportunity to bring this issue to the attention of the Houseof Commons in question period. We request that the NDP Party demand ofthe Government that either the accumulated savings of small retail noteholders be returned or that other actions be taken to protect theirlegitimate rights to recourse under Canadian law. The following URLprovides an April 6, 2008 newspaper article which does a good job ofexplaining the predicament of the small investor in the ABCP fiasco(http://investorvoice.ca/ABCP/ABCP_TStar_06Apr08.htm).

The ABCP market collapsed in mid-August last summer as concerns overexposure to American sub-prime mortgages spread into Canada and newclients could not be found for ABCP. The (frequently foreign) bankswhich had been paid to provide assistance in this type of situationrefused to provide liquidity and our savings have been frozen eversince. Retail savings total around $350 M and are less than 1 percentof the total $32 B of commercial paper which is affected. It isimportant to note that much of the ABCP paper is leveraged (i.e. 1000dollars of paper have been used to secure an asset value of $12,600); hence unwinding the entire ABCP structure could involve something like$230B; this is large enough to disrupt both the Canadian and worldeconomies!

A committee of large Canadian institutional investors was formed inAugust to find a solution to this crisis. Over the last 8 months this"Pan-Canadian Committee" has developed a restructuring plan which wouldconvert the short term ABCP into long term notes such that institutionalcreditors can hope to eventually get their money back. The details ofthis plan are very complicated but the implications for small retailcustomers are substantial. The proposed deal could allow us to receive10% of our money back in 2013 and the remaining amount (there is noguarantee on what this is) in 2016. This may be a good strategy for alarge institution but small, frequently elderly, retail customers cannotwait this long. The retail customer's group had money in short term"deposits" because we needed it to pay bills, finance our children'seducation, buy a house or undertake the other needs of daily living. Asthere were no "retail" investors on the Pan Canadian Committee, theserequirements were overlooked by the people developing the restructuringplan.

The Pan-Canadian Committee petitioned the Ontario courts for bankruptcyprotection on March 17, 2008 using provisions of the Companies CreditorsArrangement Act (CCAA). All owners of this paper are to vote on theproposed restructuring on April 25, 2008.

In the last 8 months there has been much speculation on how thisunfortunate circumstance arose. It is my understanding that theLiberals and the Bloc Quebecois voted for FINA to open an investigationinto this matter in the next few weeks (the NDP was not present for thevote, but my understanding is that it supports the hearing too). Whatis known is that the American credit rating agencies, such as Standardand Poors, refused to rate Canadian ABCP because they felt the liquidityagreements with the banks could not be relied upon. Despite thisassessment (which was made in 2002 and was recently proven to beaccurate), the Canadian Dominion Bond Rating Service or DBRS agreed to"rate" the Canadian ABCP and gave it their highest standard, equivalentto Government of Canada T-bills. The Provincial Governments of Canadadid not stop the ABCP sponsors from putting the paper onto the marketwithout a "prospectus," which is a document that would have explained toconsumers what the underlying assets were. In most of the retailcustomer group, the ABCP was wholesaled by Scotia Capital, who sold itto retail outlets, such as Canaccord or Credential Securities. It hasbeen widely reported that Scotia Capital received a letter from thesponsor (a company called Coventree) that Canadian ABCP was in troubleon July 24., 2007. Substantial quantities of this paper weresubsequently sold into the Canadian market to retail clients who weretold it was "just like a T-bill or GIC", or were not informed beforetheir existing T-bill like savings products were rolled over into ABCP. It is alleged that by the time the paper was frozen on August 13, 2007Scotia Capital had managed to unload $140 M of ABCP onto the retailmarket and had reduced their own exposure to about $200 million. Canaccord, National Bank and Credential, have taken very substantialcriticism for misrepresenting this product to their customers. According to the April 6, 2008 Toronto Star article "Little GuyBlameless in This Mess," written by Doug Peters and Arthur Donner, manyfinancial organizations had their finger in this ABCP product and manyfailed to undertake their responsibilities, despite being paid toperform this service.

The proposed restructuring deal includes an all encompassing legalrelease which will ensure that none of the following can be sued byanyone for any action whatsoever: bank asset providers and liquidityagreement providers; trust companies acting as trustees; DBRS; sponsors;wholesale and retail distributors; their auditors, financial advisorsand lawyers; and, even members of the Pan Canadian Committee that areinstitutional investors The retail customer group never had a seat atthe Montreal Accord table and so this group is not covered by the legalrelease in terms of the large financial organizations being free to sueretail customers who might complain too vociferously.

If the restructuring agreement is passed, the legal release stops theretail customers (even those who voted against the restructuring) fromtaking any action to claim for any damages in any manner and at anyforum. This intends to stop all judicial, arbitral, administrative orother forums available to ABCP owners to obtain remedy for theirdamages. The court causes of actions being denied include breach offiduciary duty, breach of trust, failure in duty of care,misrepresentation, product defect and liability, return of goods takenin the course of unlawful conduct or criminal fraud.

The Pan Canadian Committee advised small retail investors last week toaccept the restructuring agreement. However, many people cannot wait 5to 9 years to see what, if anything, is left at the end of therestructuring deal. They will not be able to recover their savings inthe shorter term as the new notes are expected to trade at a substantialdiscount. We have been told that if this deal fails, we will be leftwith little or nothing! However, if we accept the restructuring, wewill not be able to sue the responsible parties for any short fall orfor damages, which in some cases are very substantial. We have alsobeen provided with no information on what the value of the restructurednotes will be nor have we been provided with any guarantee of whatpercentage of our savings might be eventually recovered. This amountsto a gross miscarriage of justice and is possibly an infringement underthe Charter of Rights and Freedoms.

It is our position that the CCAA should not be used to shelter unlawful,or potential criminal behavior, or to restrict victims from seekingjustifiable remedies for damages caused by the CCAA parties who wereinvolved in this flawed savings product. The present restructuringprocess was developed between large organizations principally for theirmutual benefit. The legitimate needs of the small retail owners, whothought they had a safe place to park their savings (and did not receiveany higher interest rate appropriate for a risky product that would givethem reason for suspicion of risk) are being trampled on. Most of ussimply want our money back and for this whole mess to go away. Theproposed restructuring deal does not do this, and it severely limits ourlegal rights to pursue other courses of actions under Canadian law.

A group of affected Canadians has joined together to fight this issue. Arepresentative number of us from across Canada have put our names tothis letter. We have used a web site to exchange information and toprovide mutual support in this fight against the large financialinstitutions in Canada. You might be interested in seeing how thisgrass roots organization has managed to pull people together from allacross Canada (go to http://www.facebook.com/ search for ABCP, requestpermission to log in from the administrator Brian Hunter). Thefollowing web site provides a comprehensive list of articles on the ABCPissue (http://investorvoice.ca/ABCP/ABCP_index.htm).

We would be pleased to discuss this issue with you at your convenienceor to provide any additional details which you might require.

A summary of Case Study #2, the case of legal exemptions granted by securities regulators on $32 billion worth of substandard investment paper which needed to be sold by financial institutions in Canada.

I would like an honest answer from our Finance Minister. Why are investment brokers allowed to violate the law?More than a billion dollars of substandard investments have been sold in Alberta, with the permission of the Alberta Securities Commission. (ASC). In Canada $32 billion has gone missing with bad ABCP commercial paper alone.

The cost of every other crime in the country is approx $40 bil according to Justice Canada, so we are talking about one single financial crime equalling nearly every other crime in canada. Legal exemptions have allowed substandard investments and advice to be sold by the thousands to Canadians, without notice being sent to the investors.

Examples include Concrete Equities, ABCP, house brand mutual funds, Limited partnerships, Income Trusts, I stopped reading names when I got to over 1000 legal exemptions since 2006. Ponzi schemes appear to be the only dealer in Canada which has not yet received permission to violate our laws. Banks and mutual funds pay a fee and get “permission” to break our laws. Does the public know any of this? Should they be told this information?

The questions still unanswered by Iris Evans after five requests:

-What public interest is served by allowing financial laws to be violated by certain people? -Why are back-room deals done to violate our laws without public input and without public notice?-Where is the public process, the transparency?-Why is our Alberta Finance Minister suppressing this matter, rather than protecting the citizens of Alberta?

Here is the only answer received to date from the Alberta Finance Ministry:

“In this particular situation (ABCP) it appears the commissions carefully considered the situation and acted properly in granting the exemptions.”

Here is the official reason given for the exemptions by the ASC:

“Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.”

A public inquiry will show a damaging incestuous relationship between the financial services industry and our government securities regulators. Our Minister of Finance should be moving forcefully towards honest accountability. She is not.I ask for a commission of public inquiry. A public inquiry specifically to investigate these questions. In the event that this is not possible from our Finance Minister, then I must respectfully ask that she resign the position as Finance Minister.

These matters have caused billions of dollars to be siphoned out of our economy by legal tricks assisted by 13 securities commissions. They will continue to do so for years unless corrective action is taken. Our province can no longer afford the type of help that is coming from this Ministry. Contact the writer at lelford@shaw.ca if you would like to add your name in support of this. Larry Elford

By Daryl-Lynn Carlson | Publication Date: November/December 2009 He hails from Five Islands, a small community overlooking the Bay of Fundy on the coast of Nova Scotia; an idyllic setting where most of the town’s 300 or so residents lead a relatively simple life. Yet Purdy Crawford, fueled with drive and ambition, early on in his career decidedly ensured his life would be anything but simple.

After graduating from Mount Allison University and then Dalhousie Law School in 1955, he took his new bride, Beatrice, to Cambridge, Mass., where he attended Harvard University to get his masters in law. He was just 24.

At Harvard, Crawford was taken under wing by the late Archibald Cox, who would go on to earn a reputation as an advocate of the public interest after serving five months as Watergate special prosecutor — a position from which he was ultimately fired in 1973 by then-president Richard Nixon in what came to be known as the Saturday Night Massacre.

Following graduation, Crawford opted to launch his career in Toronto. “When we came to Toronto, we didn’t know anybody.” But that would quickly change. He had articled under the direction of fellow Nova Scotian, Roland Ritchie, who was appointed to the Supreme Court of Canada in 1959, and landed a job as an associate at what is now Osler Hoskin & Harcourt LLP shortly before Dalhousie schoolmate Bertha Wilson joined the firm. During his first 10 years at Oslers, he would receive tutelage from head of the firm — and a descendent of its founding family — Hal Mockridge. “In those days, we didn’t refer to people as mentors but looking back, it’s obvious he fit that category,” remembers Crawford. “He was not a business lawyer, but just a really good lawyer. We were generalists then. But he was understanding of my weaknesses and pointed them out to me from time to time and later, I became the beneficiary of a lot of his clients.”

And so an esteemed, if controversial, career had begun. With his beginnings in the profession rooted in corporate and business law, Crawford set out to establish more practical expertise by studying investing and getting into the market. He also would get involved at a governance level to attain first-hand experience by sitting on numerous corporate boards — even on companies he represented as a lawyer, which was an acceptable practice 30 years ago.

By 1962, Crawford became a partner at Oslers and in 1970, he achieved senior partnership. He was also a guest lecturer or instructor at Toronto’s esteemed post-secondary institutions including Osgoode Hall Law School, York University, and the University of Toronto, and was becoming known to various levels of government, agencies, and organizations for his willingness to participate on committees responsible for reviewing legislation, such as developing Ontario’s Securities Act in the 1960s.

That experience would eventually lead to his overseeing of the recent restructuring effort of $35 billion worth of asset-backed commercial paper (ABCP) that froze up on the market in Canada two years ago, leaving thousands of investors, many of them elderly, empty-handed. Since, he has been commissioned by the federal government to oversee a proposal for establishing a single securities regulator in Canada, and has been called on by the province of Ontario to head a mandated review of the Ontario Securities Commission.

But back when he was still making his name, the cumulative number of obligations, from boards of directorships to charitable organizations to government committees, that Crawford had taken on would likely make many lawyers shudder. At home, he had six young children to dedicate time to along with his growing list of activities outside of his practice.

In 1985, he made a critical move, initiating a bid to become president and chief operating officer of Imasco Ltd., where he would inevitably ascend to chief executive officer through succession. Having been on Imasco’s board of directors for 11 years, he knew the company well, and its CEO at the time, Paul Paré, had plans to retire. “Every lawyer who understands anything about business would never have left to run an in-house legal department,” says Crawford of his decision. And while he admits it “wasn’t an easy leave” from Oslers, his responsibilities mushroomed upon his arrival. In 1986, Imasco acquired Canadian building materials company, Genstar Corp. and its Canada Trustco Mortgage Co. “Almost immediately I led the acquisition of Genstar to get Canada Trust and right away, we had a lot of Genstar assets to get rid of,” he says. Under Crawford’s direction, Imasco unloaded Genstar divisions including waste management, cement, and real estate companies in order to increase the value of Canada Trustco. He also recruited Ed Clark, who’s now head of the TD bank, to the trust company.

Smoke and mirrors?

The activities of Imasco, at the time of Crawford’s tenure leading the company from 1985 to 1995, would later come under the scrutiny of federal authorities during investigations of smuggling schemes allegedly orchestrated by Canadian cigarette makers to Page 1of 5 Canadian Lawyer Magazine - Purdy Crawford: Doing it all 27/11/2009 http://www.canadianlawyermag.com/Doing-it-all.html

During the 1990s, cigarette makers in Canada increasingly exported their products to the U.S. and facilitated their re-importation back into the domestic market. Technically, the practice was illegal and police ultimately arrested former JTI-MacDonald Corp. (formerly RJR-MacDonald Inc.) president Edward Lang on charges of fraud in the spring of 2007. The charges against Lang and six other JTI executives were initially dropped but reinstated by the Ontario Superior Court in February 2008. Two former RJR MacDonald executives, Les Thompson and Stan Smith, pled guilty to smuggling and fraud charges. They are expected to testify at trial against their former company and president.

No other tobacco executives were charged criminally and ultimately in 2008, Imperial Tobacco Canada and Rothmans Benson & Hedges collectively agreed to pay $1.15 billion in criminal and civil fines relating to allegations of smuggling between 1991 and 1996.

According to a former Imasco executive, the company was deeply involved in the smuggling of product to ensure it kept its Canadian smokers inexpensively supplied and also recouping value for shareholders. Paul Finlayson, who has been vocal as a sort of ‘whistleblower,’ says his role was as a strategic planner within Imasco’s hierarchy, drafting mathematical scenarios of the cost and profitability to export product to the U.S., pay minimum royalties, then have the bulk of the product smuggled back into Canada via reserves such as the Akwesasne Mohawk Nation bordering Quebec, Ontario, and the U.S. “Imperial Tobacco engaged in the distribution of tailor-made cigarettes on a smuggling basis,” Finlayson told Canadian Lawyer. “This filled the hole in Imperial’s earnings and in 1993, Imperial had a banner year because it shipped unlimited quantities across the border.”

While Crawford is reluctant to discuss any aspect of his dealings with Imperial during his leadership of Imasco, Finlayson says he met with his CEO regularly during that time to brief him on his projections.

Finlayson still harbours some bitterness about the way he was forced in January 1994 to leave his job at Imasco after 16 years. During his free time, Finlayson had been instrumental in establishing an addiction centre on the Akwesasne reserve and says the company asked him to use this access to identify the people involved on the front lines of the reserve’s tobacco smuggling operations and provide a report on amounts, products, and prices. He refused on principle and was told by the CFO at the time not to report back to work. He then requested a meeting with Crawford. “A week went by and I didn’t hear anything, so I knew what the answer was,” says Finlayson.

It wasn’t until the fall of 2004 that the RCMP obtained evidence to initiate a search of Imperial Tobacco’s Montreal office. Police seized documents related to Imperial’s smuggling activities including a letter written in 1993 by Imperial’s president and CEO Don Brown, addressed to the managing director of the company’s parent, British American Tobacco. Brown wrote: “Although we agreed to support the federal government’s effort to reduce smuggling by limiting our exports to the U.S.A., our competitors did not. Subsequently, we have decided to remove the limits on our exports to regain our share of Canadian smokers. . . . Until the smuggling issue is resolved, an increasing volume of our domestic sales in Canada will be exported, then smuggled back for sale here.” Following the release of the court documents that led to the search of Imperial’s headquarters, a spokesperson for Imperial Tobacco told media that while Imperial knew about the contraband activity, the company did not collaborate with criminals.

The tobacco business is not something that piques Crawford’s interest for discussion. Instead, he recalls the opportunity to learn the operations of some of Imasco’s holdings he worked hard to diversify, such as Shoppers Drug Mart and Hardee’s fast-food restaurants. “It was great fun visiting the branches,” he says, “so it was quite an experience.” Imasco’s market capitalization grew from $131 million in 1970 to $18 billion in 1999, much of its growth attributed to Crawford’s leadership over his 10 years. Crawford left Imasco in 1995, recruiting fellow Oslers partner, Brian Levitt, who stayed on as CEO until 2000.

An artful compromise

Crawford emerged from the Imasco experience with his reputation unblemished. Most recently, he was called upon to parlay his expertise as the head of the Pan-Canadian Investors Committee for Third-Party Structured Asset-Backed Commercial Paper, charged with finding a solution for the thousands of investors in Canada who lost significant money through their purchase of ABCP.

When the sub-prime market south of the border imploded in 2007, investors here holding $32 billion in ABCP found their investments frozen. Financial institutions and major market players met for what became known as the Montreal Accord Agreement, which set out terms and mandated a committee to resolve the gravity of losses. Crawford was selected as its chairman. He says he was keen to find an expeditious resolution. “I had great disappointment that we didn’t achieve a deal in December of 2007 or even March of ’08, but the reality is with Lehman Brothers going under and all that had happened after that, the deal we would have made and the new paper we would have issued would have been under water, it would have blown up,” he says. “Could we have done a better deal? As I said in my affidavit filed with the court and which the court accepted, doing these deals is the art of the possible.”

Following the Montreal meeting, the committee embarked on about 80 meetings with investors across the country. “I had not realized at the beginning that we had so many small investors,” says Crawford. “Some had taken their niece’s money and invested it, there were school teachers who’d retired. They were upset and angry, and justifiably so.” He acknowledges that tension was thick during the first few meetings although he finally found a conciliatory voice during an event in British Columbia. “In Vancouver, I think we did a pretty good job of convincing [investors] that we were there to help them, that we were not the perpetrators of the problem. I started to respond to their e-mails and sometimes called them,” he says. Most of the investors invited to the meetings hosted by the committee were those who had lost under $1 million; for a group of retailers who had invested more than that in ABCP through their businesses, no resolution had yet been considered.

“Basically, the retail public was not informed prior to the filing for bankruptcy protection, so we had 1,800 families who read in the paper that this paper they were told was a short-term problem was seeking bankruptcy protection in court,” says Diane Urquhart, an independent investment adviser who represented retail investors at the hearings. She says many of her clients were rocked by the revelation they might not qualify under the restructuring plan. “We had a number of individuals who were on suicide watch. We Page 2of 5 Canadian Lawyer Magazine - Purdy Crawford: Doing it all 27/11/2009 http://www.canadianlawyermag.com/Doing-it-all.htmlcommunicated this to Mr. Crawford and asked him to communicate with the people on suicide watch and eventually he wrote an e -mail that there was going to be significant impaired value.”

The resolution determined by Crawford’s committee and approved by investors enabled parties affected to exchange short-term notes for securities that will appreciate over about nine years. In return, investors forfeited their right to sue. Investors were asked to approve the resolution although many retail investors had either given up or had found private settlements; those who were left represented only a minority. So while they were unsatisfied with the resolution, they were unable to influence the vote.

One of the investors affected by the problems did follow through and end his life. “They say the linchpin of the success of the deal was to get the foreign banks to co-operate, but they gave them just about everything that they wanted including immunity,” says Urquhart. “So there were 36 families who owned more than $1 million who become collateral damage.” Urquhart points out that Canada is one of the few countries that has allowed investors to shoulder most of the losses related to ABCP. She says of Crawford, “He didn’t finish the job. Here we are almost two years later and there’s no settlement.”

The retail investors, with Urquhart’s assistance, are continuing to seek an alternative resolution at the federal level along with accountability from institutions that sold the notes in the first place.

Crawford says he has no regrets. “With so many groups, corporations, pension funds, and banks having different interests, and with the paper being so complex and integrated into all kinds of institutions, when I look back, to me it was a wonder we got it done, never mind could we have done it better. I’m rather proud of it to be frank.”

Yet along with the retail investors’ continuing efforts, the fallout continues; the City of Hamilton filed a statement of claim in Ontario Superior Court in September alleging it was misled by Deutsche Bank about the risk involved in its purchase of $10 million worth of ABCP. Its purchase of ABCP did not fall under Crawford’s arranged agreement so the city had not waived its right to sue.

Esteem and awards

So after all that excitement in his career, why hasn’t Crawford officially retired? At 78, he continues to go to work at Oslers, although he’s no longer practising law. He begins his day early; rising before 6 a.m. and often gets to the office around 7 a.m. He attests he is still in good health and continues to sit on the boards of several large public companies and actively fundraises for charitable organizations.

Over the course of his career, Crawford has been the recipient of numerous awards, including Officer of the Order of Canada, and he maintains a high degree of respect amongst fellow lawyers. David Jackson, a partner in the securities group at Blake Cassels & Graydon LLP, has known Crawford for years. “I remember with particular fondness my first exposure to his kindness and thoughtfulness. I was a relatively junior lawyer who had been engaged to make an argument before the Ontario Securities Commission for a new client for whom Blakes had not previously acted. The argument was based on an opinion provided by a senior partner of another major Toronto law firm that was, to put it kindly, rather sketchy at best. I made the argument as best I could. Purdy was acting for an interested party who was not totally sympathetic to our new client’s position. He stood up after I had finished, and gently but thoroughly destroyed the effect of my presentation,” says Jackson. “Some days later, I received a handwritten note from Purdy, apologizing. He said that he had not known that the argument had been imposed on me by others and had he been aware, he would never have dealt with it in the way he had. I don’t know which I appreciated more, the unnecessary apology or the fact that a very senior practitioner had taken the time to write it.”

At Oslers, Crawford serves as a mentor to the next generation of lawyers while also helping to facilitate business for a handful of government clients and continuing his work for charities. Dale Ponder, managing partner at Oslers’ Toronto office provided the following statement about Crawford’s current role as counsel at the firm: “We have been very fortunate to draw upon Purdy’s legal talents and business acumen during periods when he was an Osler partner and leader of the firm — and also during more recent times when he has filled more of an advisory role to a new generation of our lawyers.

“Mentorship and leadership development have been hallmarks of Purdy’s career and a long list of Osler partners have benefited from his passion to see succeeding generations successfully rise to leadership.”

Ponder continues: “I personally marvel at Purdy’s continuing commitment and drive to making a difference. He continues to pursue his business interests, but also makes time for numerous charitable causes of importance to him. Along with this, he is periodically called upon for special mandates of national significance, such as the recent ABCP crises. He has had a major impact on the Canadian business scene throughout his career and this is just one recent example.”

Currently, Crawford spends his time helping with the mandate of the Muriel McQueen Fergusson Centre for Family Violence Research at the University of New Brunswick, and his principal charity is the Mount Allison University where he’s been bestowed the title of chancellor emeritus. He still accepts speaking engagements, most recently addressing the Montreal Board of Trade about the value of leadership in the context of risk and corporate governance. “I’m not quite as busy as I used to be,” he says almost regrettably, but adds, “I do have the luxury of being able to do these things without being paid.”

When he’s not working, he is an avid follower of the sports pursuits of his 15 grandchildren and spending time with his family at his country home in Caledon, Ont. Will he ever fully retire? “I guess I will when I just can’t do it anymore.” But for the time being he figures at Oslers, “I think they just like to have my name around.” Comments Add New Search Donald G. J. Cormier |2009-11-23

Boyd ErmanPublished on Wednesday, Nov. 25, 2009 12:00AM ESTLast updated on Wednesday, Nov. 25, 2009 9:05AM ESTAlmost a year after the completion of the landmark deal to save the $32-billion asset-backed commercial paper sector, one of the key pledges of the deal's creators is coming true: investors stuck with the paper can now get out.

Hedge funds, mostly ones based in Canada, are snapping up notes that were distributed to smaller holders, such as mining companies, Crown corporations and corporate pension plans that were saddled with frozen ABCP, and which are now looking to get some cash or cut losses. The paper held by the Caisse de dépôt et placement du Québec, National Bank of Canada and the other large holders who were responsible for crafting the restructuring deal isn't on the market, traders said.

But the market for the notes has heated up significantly in recent weeks, with traders reporting that lots of paper as big as $40-million are changing hands. Prices have jumped as well, with the highest-quality notes now selling in the 50-cents on the dollar range, which implies about a 10-per-cent annual return if a buyer holds on until the paper matures in six years.

The growing activity in the market is a victory for the Purdy Crawford-led committee that crafted the restructuring of the ABCP market, which was completed in January after more than a year of agonizing negotiations. One of the main goals was to give investors new paper that they could at least sell, even if it wasn't for full value immediately. Because of the way the notes work, the prices should move closer to 100 cents on the dollar as the paper approaches maturity in 2016.

"It is finally trading, so at least you can get out if you want to," said John Rudd, a managing director at Miller Tabak Roberts Securities in New York, which has traded more than $100-million of the paper.

Investors who held frozen ABCP after the market seized in mid-2007 as the credit crunch got rolling were given new paper earlier this year at the end of the Crawford committee's work. For the first few months, very little paper changed hands, even though it was theoretically freely tradable.

Traders attribute the new found interest in ABCP of late to hedge funds that are seeking ways to get double-digit returns, which are getting tougher to find now that stocks and bonds have had huge rallies.

In March and April, there were many fixed-income assets such as corporate bonds that were offering big yields, so investors weren't generally interested in ABCP, given how complex it is. Since then, most other assets have had big runs, and ABCP lagged, so investors began to take a second look to see if there was still money to be made.

"More and more hedge funds, including U.S. hedge funds, are starting to take a look at this," Mr. Rudd said.

Still, the notes are enormously complicated, requiring those interested in buying them to wade through hundreds of pages of documents to understand the underlying assets that determine the value of the notes. That remains a turnoff for some who have considered buying.

"There are easier ways to make 10 per cent," said one hedge fund money manager who has looked at buying the notes and taken a pass.

********

The new ABCs of ABCP

- What's happened ABCP holders were given new paper in January that they were free to sell - but, the market is only heating up now.

- Size of the market: Potentially about $10-billion, but only a fraction has traded hands so far.

- How much does it cost? The best paper on offer is trading for a little more than 50 cents on the dollar.

- Who's buying? Hedge funds looking for double-digit returns and willing to do their homework.

Former senior diplomat Richard Colvin alleges that he warned the government that prisoners turned over to Afghan authorities by Canadian troops were being tortured. The government agency responsible for investigating had been stonewalled and got nowhere. Senior officials and military personnel deny any knowledge. The Minister of Defence trashes the messenger. The opposition and media demand a public inquiry.

Sound familiar? Consider these comparable situations.

A Polish visitor to Canada dies at the Vancouver airport after being restrained and "tasered" by the police. A former prime minister receives secret cash payments from a government lobbyist. Canadian officials are implicated in the detention of a citizen in New York, who is then sent to Syria, imprisoned and tortured. People suddenly become sick and die because of the contamination of a community's public water supply. A teenager is tortured and killed by Canadian troops deployed in Somalia. Air India, sponsorship, wrongful convictions ...

Common to all of these examples is that the Canadian public did not trust ordinary government institutions or processes to tell them how such extraordinary events could happen. What went wrong? Who was responsible? How can this be avoided in future? In each case, a commission of inquiry was established.

But what exactly is a public inquiry? Where does it "fit" in law and government? What do commissions offer that other public institutions can't deliver? Why does the public trust them? Why do governments expose themselves to investigation and criticism?

The commission of inquiry is a "residual institution" in the machinery of government. It is authorized by a statute created by the legislative branch and invoked sporadically by the executive branch, but it operates independently of both. It is a response to public expectations or demands. In the words of former Supreme Court of Canada judge Peter Cory: "One of the primary functions of public inquiries is fact-finding. They are often convened in the wake of public shock, horror, disillusionment and skepticism, in order to find the truth."

They simply find facts and make recommendations, but they have five features that inspire public confidence. Other institutions have some but not all of these features.

A fundamental feature is the independence of the commissioner, who has no vested interest in the outcome and will simply let the chips fall where they may. It is not an internal investigation that could be perceived as trying to protect the people or institutions that are under scrutiny. Nor does a public inquiry have the partisan nature of legislative committee hearings. Often a judge is appointed to enhance the perception of independence, and it is then informally described as a "judicial inquiry."

A second feature is the effectiveness of the commissioner to get to the bottom of the problem. All other professional obligations are set aside and all available energy and time are devoted to the inquiry. Resources and staff are provided to create a team that gives intense and undivided attention to the mission. This is a luxury that other officials and institutions seldom can afford.

The public also will draw confidence from the terms of reference or mandate, which is designed to address the specific issues and questions that cause public concern. This mandate itself will be the subject of media and public scrutiny.

A fourth feature is the broad investigative powers to compel the production of documents and the testimony of witnesses. A trial judge is a passive observer who is bound by the issues between the parties, pleadings or charge. A commissioner can go where the mandate and evidence lead.

The final feature that inspires public confidence is transparency. Hearings are conducted in public, often televised, and now often are available online. They receive extensive media coverage and public comment. In contrast, a criminal investigation is usually conducted in private until a charge is laid.

The decision to establish a public inquiry is inherently political. It may take the heat off a government that is under strong attack, especially when critics demand a full inquiry. Once that demand is met, those critics are bound to wait for the inquiry's report before expecting a further government response. But during the hearings and in the final report, the government loses control of the information made public and how it is expressed. Both the proceedings and findings may reflect badly on the government.

The government must first assess its exposure and alternatives. A resignation may suffice. Does the problem have "legs," or can the government simply repeat its response until the media and public grow tired of the issue? Does it risk being hammered with criticism only to have to succumb anyway? There are many ramifications.

Commissions of inquiry are sometimes criticized for their delay and cost, but that is usually a problem with how they are conducted rather than with the institution itself. They have made an invaluable contribution to Canada since Lord Durham and, inevitably, they will continue to do so in future.

Ed Ratushny is a law professor at the University of Ottawa and author of The Conduct Of Public Inquiries.

You just have to laugh: The fallout from the fiasco known as non-bank, asset-backed commercial paper (ABCP) has hit an unlikely player: Quebec's very own financial services industry regulator, the agency that is supposed to protect investors from exposure to such toxic products. The Autorité des marchés financiers (AMF) recently revealed in its annual report that it has written down. to $16-million, a $33-million ABCP portfolio. The bad investment was made through pension-fund giant Caisse de dépôt et placement du Québec, which plunged deeply into the ABCP market. The Caisse has the responsibility for managing the funds of several provincial agencies, including the surplus from the AMF's deposit insurance fund.

Recently the media has announced that several provincial securities commissions have joined with the Investment Industry Regulatory Organization of Canada (IIROC) to investigate Canadian banks who sold Asset backed commercial paper. If you recall this is the “selling of sketchy” debt scam in which $32 billion has been taken from the Canadian economy and to date no one has been held to account. Here is why that might be.

Imagine if the very people who are now investigating the scam, were on the inside of helping set it up? Impossible you say.

Enclosed is a copy of the Ontario Securities Commission (and 12 provincial and territorial commissions) approving and allowing these products to be sold whilst not meeting our laws. It is called a legal exemption and for a few hundred or a few thousand dollars any investment firm can purchase such permission to skirt our laws. (see “orders, rulings and decisions” at http://www.osc.gov.on.ca) If your newspaper would print the web site (http://www.osc.gov.on.ca) and the highlighted text on the exemption orders it would be helpful to the reader.

One requirement is a willing regulator. On this particular exemption is the name of an OSC staff member and Susan Wolbergh Jenah.

The OSC is now pretending to investigate investment dealers, whilst pretending to ignore their own participation in the scam. The Investment Industry regulatory body is now headed by Susan Wolbergh Jenah. She used to be vice chair of the OSC, earning about $446,000 when she signed these (and other) exemption orders. She now earns approximately $700,000 as head of the IIROC which is investigating the very scam she helped sign for. Salaries of $446,000 to $700,000 paid for by the investment industry which they regulate is something I have found to create very willing regulators.

Now imagine if your Canadian Food Inspection agency were to allow tainted food into our food chain, for a fee, and then claim they were going to investigate the damage done by the tainted product. They would be investigating themselves, and we would be surprised by this. This is exactly what is happening and this is where Iris Evans comes into play here in Alberta. She is our Minister of Finance, and she is fully aware of the thousands of legal exemptions that our financial inspection agency allows, yet she does nothing to stop them. Our health care is being cut, our education is being cut. Jobs are being cut, and our Alberta Treasury Branch needed a billion dollar bailout. All due to “worst” practices, connections, cronyism. Due to taxpayer money and investments being caught up in this scam. With the help of our provincial securities commissions. Incestuous financial regulatory regimes. It is time for a change. It is time for best practices and simple conflict of interest guidelines to be incorporated into our financial regulations.This will be my fifth request to Iris Evans to come forth and come clean with the public about the practice of legal exemptions. What is your Finance Minister telling you? You should ask her. Maybe if one hundred people ask, she might then feel like giving an answer.

HeadnoteMutual Reliance Review System for Exemptive Relief Applications -- Relief from the prospectus and registration requirements granted for trades in negotiable promissory notes and commercial paper (short-term debt instruments). The short-term debt instruments may not meet the "approved credit rating" requirement contained in the short-term debt exemption in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106). The definition of an "approved credit rating" requires, among other things, that every rating of the short-term debt instrument be at or above a prescribed standard. The relief is granted provided the short-term debt instrument:(i) matures not more than one year from the date of issue;(ii) is not convertible or exchangeable into or accompanied by a right to purchase another security other than a short-term debt instrument; and(iii) has a rating issued by one of the following rating organizations at or above one of the following rating categories: DBRS: "R-1(low); Fitch: "F2"; Moody's: "P-2" or S&P: "A-2".The relief will terminate on the earlier of 90 days upon an amendment to section 2.35 of NI 45-106 or three years from the date of the decision.Applicable Ontario Statutory ProvisionsSecurities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53 and 74.May 17, 2006IN THE MATTER OFTHE SECURITIES LEGISLATION OFBRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,PRINCE EDWARD ISLAND, NOVA SCOTIA,NEWFOUNDLAND AND LABRADOR, YUKON,NORTHWEST TERRITORIES AND NUNAVUT(the Jurisdictions)ANDIN THE MATTER OFTHE MUTUAL RELIANCE REVIEW SYSTEMFOR EXEMPTIVE RELIEF APPLICATIONSANDIN THE MATTER OFBANK OF MONTREAL(the Filer)

MRRS DECISION DOCUMENTBackgroundThe local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for:(a) an exemption from the dealer registration requirement in respect of a trade in a negotiable promissory note or commercial paper maturing not more than one year from the date of issue (together Commercial Paper); and(b) an exemption from the prospectus requirement in respect of the distribution of the Commercial Paper,(collectively, the Requested Relief).Under the Mutual Reliance Review System for Exemptive Relief Applications(a) the Ontario Securities Commission is the principal regulator for this application, and(b) this MRRS decision document evidences the decision of each Decision Maker.InterpretationDefined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.RepresentationsThis decision is based on the following facts represented by the Filer:1. The Filer is a bank listed on Schedule I of the Bank Act (Canada). The Filer's head office is located in Montréal, Québec and its corporate headquarters and executive offices are located in Toronto, Ontario.2. The Filer is a reporting issuer in each Jurisdiction having such a concept. The Filer is not in default of any of its obligations as a reporting issuer under the Legislation of any such Jurisdiction.3. The Filer is not registered as a dealer or adviser under the Legislation in any province or territory of Canada.4. The Filer trades in and distributes Commercial Paper in the Jurisdictions through the purchase of such Commercial Paper as principal for its own account or with a view to distribution or as agent for certain issuers.5. Paragraph 2.35(1)(b) of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides an exemption from the dealer registration requirement and prospectus requirement for a trade in Commercial Paper (the Short-term Debt Exemption) where, among other things, the Commercial Paper "has an approved credit rating from an approved credit rating organization".6. NI 45-106 incorporates by reference the definitions for "approved credit rating" and "approved credit rating organization" that are used in National Instrument 81-102 Mutual Funds (NI 81-102). The definition of an "approved credit rating" in NI 81-102, requires, among other things, that (a) the rating assigned to such debt must be "at or above" certain prescribed short-term ratings, and (b) such debt must not have been assigned a rating by any "approved credit rating organization" that is not an "approved credit rating".7. The Filer proposes to trade in Commercial Paper with the following general characteristics:(a) it matures not more than one year from the date of issue;(b) it is not convertible or exchangeable into or accompanied by a right to purchase another security other than Commercial Paper; and(c) it has a credit rating from at least one of the following credit rating organizations at or above one of the following rating categories listed below:Rating Organization Rating

Dominion Bond Rating Service Limited R-1 (low)

Fitch Ratings Ltd. F2

Moody's Investors Service P-2

Standard & Poor's A-28. The Commercial Paper may have a lower rating than required by the Short-term Debt Exemption and accordingly, the Short-term Debt Exemption may not be available.DecisionEach of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met.The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that the Commercial Paper:(a) matures not more than one year from the date of issue;(b) is not convertible or exchangeable into or accompanied by a right to purchase another security other than Commercial Paper; and(c) has a rating issued by one of the following rating organizations, or any of their successors, at or above one of the following rating categories or a rating category that replaces a category listed below:Rating Organization Rating

Dominion Bond Rating Service Limited R-1 (low)

Fitch Ratings Ltd. F2

Moody's Investors Service P-2

Standard & Poor's A-2For each Jurisdiction, this decision will terminate on the earlier of:(a) 90 days after the coming into force of any rule, other regulation or blanket order or ruling under the Legislation of the Jurisdiction that amends section 2.35 of NI 45-106 or provides an alternate exemption; and(b) three years from the date of this decision."David L. Knight"CommissionerOntario Securities Commission

"Susan Wolburgh Jenah"Vice-ChairOntario Securities Commission

Next enclosure TD exemption order

HeadnoteMutual Reliance Review System for Exemptive Relief Applications -- Relief from the prospectus and registration requirements granted for trades in negotiable promissory notes and commercial paper (short-term debt instruments). The short-term debt instruments may not meet the "approved credit rating" requirement contained in the short-term debt exemption in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106). The definition of an "approved credit rating" requires, among other things, that every rating of the short-term debt instrument be at or above a prescribed standard. The relief is granted provided the short-term debt instrument:(i) matures not more than one year from the date of issue;(ii) is not convertible or exchangeable into or accompanied by a right to purchase another security other than a short-term debt instrument; and(iii) has a rating issued by one of the following rating organizations at or above one of the following rating categories: DBRS: "R-1(low); Fitch: "F2"; Moody's: "P-2" or S&P "A-2".The relief will terminate on the earlier of 90 days upon an amendment to section 2.35 of NI 45-106 or three years from the date of the decision.Applicable Ontario Statutory ProvisionsSecurities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74.April 26, 2006IN THE MATTER OFTHE SECURITIES LEGISLATION OFBRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,ONTARIO, QUEBEC, NEW BRUNSWICK, PRINCE EDWARD ISLAND,NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR, YUKON,NORTHWEST TERRITORIES AND NUNAVUT(THE JURISDICTIONS)ANDIN THE MATTER OFTHE MUTUAL RELIANCE REVIEW SYSTEMFOR EXEMPTIVE RELIEF APPLICATIONSANDIN THE MATTER OFTHE TORONTO-DOMINION BANK(THE FILER)

MRRS DECISION DOCUMENTBackgroundThe local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that trades in negotiable promissory notes and commercial paper (Short-term Debt Instruments) by the Filer be exempt from the dealer registration requirement and prospectus requirement (the Requested Relief).Under the Mutual Reliance Review System for Exemptive Relief Applications(a) the Ontario Securities Commission is the principal regulator for this application, and(b) this MRRS decision document evidences the decision of each Decision Maker.InterpretationDefined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.RepresentationsThis decision is based on the following facts represented by the Filer:1. The Filer is a bank listed on Schedule I of the Bank Act (Canada). The head office of the Filer is located in Toronto, Ontario.2. The Filer is a reporting issuer in all Jurisdictions and is not in default of its obligations under the Legislation in any Jurisdiction.3. The Filer is not registered as a dealer or adviser under the Legislation in any Jurisdiction.4. The Filer both trades and engages in distributions of Short-Term Debt Instruments in the Jurisdictions as part of its activities as a principal and as an agent for issuers.5. Subsection 2.35(1)(b) of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides an exemption from the dealer registration requirement and prospectus requirement for a trade in a Short-term Debt Instrument (the Short-term Debt Exemption) where, among other things, the Short-term Debt Instrument "has an approved credit rating from an approved credit rating organization".6. NI 45-106 incorporates by reference the definitions for "approved credit rating" and "approved credit rating organization" that are used in National Instrument 81-102 Mutual Funds (NI 81-102). The definition of an "approved credit rating" in NI 81-102, requires, among other things, that (a) the rating assigned to such debt must be "at or above" certain prescribed short-term ratings, and (b) such debt must not have been assigned a rating by any "approved credit rating organization" that is not an "approved credit rating".7. The Filer has in the past traded and proposes in the future to trade Short-term Debt Instruments with the following general characteristics:(a) they mature not more than one year from the date of issue;(b) they are not convertible or exchangeable into or accompanied by a right to purchase another security other than another Short-term Debt Instrument; and(c) they have a credit rating from at least one of the following credit rating organizations not less than the rating indicated:Rating Organization Rating

Dominion Bond Rating Service Limited R-1 (low)

Fitch Ratings Ltd. F2

Moody's Investors Service P-2

Standard & Poor's A-28. The Short-term Debt Instruments may have a lower rating than required by the Short-term Debt Exemption and accordingly, the Short-term Debt Exemption may not be available.DecisionEach of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that each Short-term Debt Instrument:(a) matures not more than one year from the date of issue;(b) is not convertible or exchangeable into or accompanied by a right to purchase another security other than a Short-term Debt Instrument; and(c) has a rating issued by one of the following rating organizations, or any of their successors, at or above one of the following rating categories or a rating category that replaces a category listed below:Rating Organization Rating

Dominion Bond Rating Service Limited R-1 (low)

Fitch Ratings Ltd. F2

Moody's Investors Service P-2

Standard & Poor's A-2For each Jurisdiction, this decision will terminate on the earlier of:(a) 90 days after the coming into force of any rule, other regulation or blanket order or ruling under the Legislation of the Jurisdiction that amends section 2.35 of NI 45-106 or provides an alternate exemption; and(b) three years from the date of this decision."Susan Wolburgh Jenah"Vice-ChairOntario Securities Commission

HOW TO STEAL $32 BILLION FROM CANADIANS.............AND GET AWAY WITH ITI feel so much better now that provincial securities commissions have announced that they will investigate the Asset Backed Commercial Paper investment crisis.

This infusion of tainted investment products helped bring the Canadian economy into the crisis, without which, we might have been isolated from the worst brunt of the storm. This was a crime in which $32 billion was taken from Canadians and everyone has gotten away with it.

To investigate those financial firms and banks who it is alleged continued to dump this product onto an unsuspecting public, after they learned just how bad the risks truly were.........to investigate this might bring Canada into the 21st Century for financial crimes.

I wonder, however, with the recent experience of institutions investigating themselves (RCMP should not investigate RCMP) if a provincial securities commission is the right authority to solve this mystery. Here is why.

They assisted in abusing the public. They helped the people they are now investigating to get around the law with a bad product.

Provincial securities commissions admit to allowing about 20 investment firms to skirt our laws, (letter posted in blog at breachoftrust.ca) and to sell this ABCP product using something called a legal exemption. All 13 commissions acted as a herd. I am not sure how many people know that financial wizards can approach our crown agents, the securities commission and get permission to break our laws. Search “exemptions” at your local securities commission. You are forgiven if you do not believe but the documents are all there on the public record.

I found that similar legal permissions have been granted several thousand times in the last number of years. Imagine the money one could make if you did not have to follow the law. Can you even imagine taking $32 billion and getting away with it? Now you know the size of the cracks in our financial regulatory system. Those in charge are getting rich at your expense.

Securities Commissions refuse to answer questions such as “what public interest” was served by these exemptions. I believe they refuse comment because they know they have been caught providing less than “honest services” to the public. A public inquiry under the Provincial Inquiries Act is requested to find out.

They refuse to allow public input. The Securities Act makes no mention whatsoever of inviting public input when the laws as exempted, so they feel it is not necessary.

They refuse to give public notice. You will get more warning if your neighbor decides to build his garage too close to your property line, than you will get if you were to invest in a product which did not meet our laws, but was sold with an “exemption”.

They continue to issue exemptions each and every year without public notice. Up to 800 exemptions some years. Some of these for investments that YOU own. Wouldn’t it be nice if they told you about this?

They earn millions of dollars each year to do so. Fee income. From the same investment firms who pay their salaries. The same investment firms who they are now claiming to “investigate”.

They will likely keep the money themselves. Even if they gain a settlement agreement with Royal Bank, Scotia, National Bank etc for failures to provide honest services to the public, our provincial securities commissions usually keep any money they collect!! That is right. It is seldom, if ever that victims of securities crime in Canada are not made victims again as money collected by todays regulators stays with those very regulators.

Their salaries are paid by the investment industry. Enough said.

They are often hired or transferred to and from the industry.

They are paid salaries as high as $700,000. That in itself is not a bad thing, but lets look closer at the pay.

The top person at the ASC earned in excess of $700,000 last year. (source 2009 annual report of ASC). In BC it was $544,000 and he attended 18 meetings in 2009. At the Ontario Securities Commission there were at one time some 90 employees who each were earning more than the very top man at the SEC in the US. These salaries paid by the very industry that they are purporting to regulate. In my opinion and experience they are paid this much to say “yes” to the industry. Is it impossible to imagine that this government regulator would become overly influenced and biased by this lucrative arrangement? At the very least it does not follow a process of best practices.“With 90 OSC employees making more than the chairman of the SEC, it’s time to look at the Ontario securities regulator’s performance and accountability Its chair and just one of its vice-chairs together make more than all five members of the U.S. Securities and Exchange Commission combined, including SEC chairman Christopher Cox” http://finlayongovernance.com/

One vice chair of the OSC a few years back, earned approximately $446,000 and in this capacity signed the legal exemptions that allowed some firms to sell tainted investment paper (ABCP). Shortly thereafter this person left the OSC and obtained a position at the Investment Industry Regulatory Organization of Canada (IIROC) and in this capacity earns some $700,000. This person then went on record as saying that the dealers who sold this ABCP product “did not know what they were selling”. The very same person who signed to allow them to violate our laws. It is becoming apparent that instead of getting higher and higher standards of behavior as ones salary goes into the mid six figures and above, we may actually be getting “yes” men who will say and do nearly anything to maintain that salary.

I now know that fraud, breach of trust, negligence and honest services violations form too large a part of the canadian financial landscape. I look forward to the day when these and other criminal offenses are enforced for white collar criminals as well as public servants who violate the public trust. Our economy and your retirement will then be in much safer condition from those clever minds who count our money whilst policing themselves.

As Richard Nixon said once, you cannot trust the folks who make the mess to clean it up. By having provincial securities commissions doing the investigating, we are setting ourselves up for failure. Regulatory failure. Economic failure. We have had enough of both.

The incestuous relationship between the financial industry and the financial regulators is indicative of something called “worst practices”, and is not something that should cause us to place our trust in these multiple regulators across the country.

I hope that a police fraud unit, a Securities Crime Police Unit or some specialty, non financially related organization will be investigating some of the largest crimes in the country, and not those very same people who can be shown to have actually participated in them or assisted them. Call your MLA and demand a public inquiry before another $32 billion is swept under the carpet. See Royal Commission or Judicial Inquiry topic at www.investoradvocates.ca for a complete essay on “How To Steal $32 Billion”.

I am about to tell you how to commit the perfect crime. A crime worth billions, and one in which no police become involved. Impossible you say. Sit back, relax, and let me tell you about my former career.............

You only have to promise to honor the “code of silence” by which all white collar criminals abide. Tell no one!

It begins like this. If you wish to rob a bank, you are subject to the criminal code of Canada, and that is a bad thing...............however, in order to make it the perfect crime, I have to change your line of thinking. I encourage you to stop momentarily, and turn the entire crime around. Imagine putting on a suit and joining the financial services industry. When a bank wishes to rob the public, there is no police force in the country that has figured out this “reversal robbery” that we have perfected in Canada. Now you are getting into an area where crime really does pay.

By now I probably do not have to convince you that far too many financial types are greedy enough to lie and steal from the public. The recent economic crisis has given us enough examples to convince the most trusting financial fan. And somehow our financial regulatory system has “fostered” this environment, has allowed it to happen.

The other shoe to drop, two shoes in fact, that I will ease you into over the course of this article is how our financial system is rigged to allow these abuses, without penalty. Lets start at the bottom of the economic food chain, with your local salesman or saleswoman selling investments and mutual funds. They we will slowly climb the ladder to learn how easy it is to commit the perfect crime against an entire economy.

There are about 130,000 registered “salespeople” in Canada (source Investment Industry Regulatory Organization of Canada, IIROC) with their three month securities course as the major educational requirement to start selling financial products by commission. They begin from day one with a major misdirection of the public. They earn the license that says “salesperson” on it, or at least it did every single day for the last thirty years until the securities commissions struck the word “salesperson” from their documents to hide this misrepresentation. They did this last month. July, 2009 to be precise. From now on you will be served by a guy with a three month correspondence course, who goes by the license category of “dealing representative”. Whatever that means. We still get to misdirect and misrepresent. We still win. You still lose.

They are trained as salespersons. Hired to sell, expected to sell or leave. In the business, the letter they get when their sales production is not high enough to satisfy the sales manager is called an “achieve or leave” letter. Client returns do not come into play, nor into measurement, it is an entirely sales and commission driven system. You are paid by an “eat what you kill” model based on commissions on transactions or fees based on your assets under administration. And yet the industry refers to it’s salespersons as advisors, trusted professionals, and advertises that “your interests come first”. “We are here to help you find the proper investment” would be a common industry promise. This is not what they deliver. For example:

According to the Investment Funds Institute of Canada, (IFIC) 80% of mutual funds sold in the past two decades or so, were sold using the highest commission paying class of funds, the DSC class. DSC stands for deferred sales charge, and it produces the biggest commission possible, in the quickest possible time, and a naturally resulting highest cost to the client. This violates the aspects of a professional advisor, the code of ethics of the entire industry, and the suitability requirements that each and every transaction must meet in this industry. The requirement to “minimize” the transaction costs to those people who you claim to “advise”, not maximize those costs. Clients have every right to ask for all their money back, but, as we shall see, this industry is self regulating, meaning we police ourselves, so they have no one to help them get their money back. We police ourselves, and you are out of luck.

The next trick of the trade, and most recent, for your local investment “salesperson” is the substitution of poorer performing and higher cost “house brand” mutual funds for independent funds. According to the Investment Funds Institute of Canada 92% of mutual fund sales in 2007 were made into something called “wrap” funds. These wrap funds include funds made up of other funds, proprietary, (house brand) funds and who knows what else. A “fund of funds” earns a fee upon fees, which is not good for you the investor. According to the Ontario Securities Commission Fair Dealing Model proposals, an investment firm earns from 12 to 26 times greater fee income when they sell you the “house brand” or the house “wrap” account. This is why you may have been sold proprietary funds, and not likely because your dealer has found a better way to manage funds than all the independent experts. They have just found a better way to get 2% more from your trust relationship. (Imagine if every doctor you visited had their own “house brand” pills to sell to you)

Double dipping, charging fees on top of commissions, or commissions on top of fee based accounts, also runs rampant by those investment types wanting to be named “vice presidents” at their firms. It is just another method of gaining or skimming an extra percentage or two in fees from the trusting client. I wont say that each and every salesperson out there is in this skimming mode, but the sales numbers paint a pretty ugly picture of an 80/20 balance of sales commissions coming before professional advice.

On to more tricks of the trade. Mutual fund fee abuse is a $25 billion dollar haircut each and every year in Canada, according to Keith Ambaschteer at the University of Toronto.

Professor John Coffee of Columbia University adds that having 13 provincial and territorial securities commissions deducts another $10 billion from the Canadian economy each year. These two independent experts put us at $35 billion behind each year without even talking of specific investment examples. That is enough money to run my province of Alberta for an entire year.............money used simply to “feed” the greed and self interest of those running Canada’s financial system. Thanks guys, you are doing an amazing job.

Add in asset back commercial paper ($32 billion), junk bonds, limited partnerships, movie deals, MURBS, tax shelters, tainted income trusts, Nortel, Bre-x, YBM, Northshield, Portus, Crocus, and all the other so-called legal investments that I cannot even remember at my advanced age, and you have a perfect recipe for skimming more money from bad investment products and intentionally bad advice than the cost of each and every other crime in Canada.....combined. (Nortel alone was responsible for evaporating up to $366 Billion. You do the math on the rest)

According to Justice Canada, all the other crime in Canada is costing us in the neighborhood of $40 billion each year. I can come up with over $60 billion each year myself without resorting to much more than a napkin, but I am truly looking forward to Prof P. Puri’s upcoming study of the amount of damages due to white collar crime in Canada. Prof Puri is an associate law professor who teaches about white-collar crime at Osgoode Hall Law School at the University of Toronto and publishes insightful reports on the nature of the financial system in Canada. Reports you should read.

The police, where are they while this is going on? Prof Puri has a study on this as well, and she concludes that the crooks are rich and powerful and well funded, while the police are outgunned in all aspects. But you should read it yourself.

I have learned that the police tend to concern themselves with the criminal code of Canada, and while fraud, negligence, breach of trust, etc fall under this code, they have been sold a nice package of goods to ignore this code in most financial cases. Those instances are usually when these crimes occur within the financial industry in Canada. Why? Because the financial industry (those cunning, manipulative, wealthy power brokers who we now know are not to be trusted) have set up something called a “self-regulatory system. They have set it up, funded it, staffed it. Here is the secret foundation of the perfect crime. “Own or control the entire investigation system.” In fact, the financial industry pays the salaries and costs of even our crown agency, the provincial securities commissions, through fees paid to them. They have their own act called the securities act. They police it, they enforce it. The trouble is that they enforce it to their advantage, and not in a manner fair to the public. If there are three parties living in this financial relationship, one being the financial dealers, two being the regulators, and three being the public, two of them are sleeping together and one is alone, in the basement, in the dark. Scared. Enough about me. I am talking about the public. While the regulators (securites commissions, and self regulators) are making passionate love to the financial industry, or vice versa, the public is simply being screwed and ignored. Not possible you say? Are we not a highly civilized, developed country? Let me tell you more.

Canada is the only developed country in the world that does not have a national securities regulator. Instead we have 13 provincial regulators in an economy the same size as Texas. I have always said that each of these territorial commissions act a lot like every bad sheriff in every bad Smokey and the Bandit movie I have seen. Acting and behaving as if they are above the law. They just keep proving it year after year. Each of these securities commissions is supported by fees paid to them by the financial industry. They purport to serve two opposite interests, one being to protect the public at large, and two being the smooth functioning of the financial industry. I can attest that after thirty years of study, they are skipping the first, and serving the second. This is where the money comes from.

For one example, on each securities commission complaint intake process, is an instruction that they will not deal with a member of the public, unless they have first gone to the industry sponsored “self regulatory” body, which is often just a trade and lobby group for the industry. So we have a crown corporation, refusing to serve the public, and instead sending them with complaint to the very association of whom they are complaining about. (mutual fund or investment dealers) It is a bit like sending an abused child to go and complain the the very persons he or she was abused by. It does not work for the victim but it works perfectly for the abuser. We win, the public loses again.

The investment dealers association (IDA) (one of our industry trade bodies that posed as a regulator) split itself in two parts a few years back to place better optics on the fact that they were a trade and lobby group pretending to be a regulator.

Thirteen provincial and territorial securities commissions defer statutory obligations away from themselves (who are charged with handling them) and to these self regulatory agencies, who cannot even claim to know what job they are supposed to be doing.

For example, here is what the Ontario Securities Commission says to a customer with a complaint:

“The OSC has recognized the Investment Dealers Association ("IDA") as a self regulatory organization (1995, 18 O.S.C.B. 5293). As such, the IDA has the authority and the jurisdiction over its members to enforce Ontario securities law as well as IDA rules, regulations and by-laws.” (These days they defer to IIROC, a newer version of the IDA, or MFDA (Mutual Fund Dealers Association)

“As there are no provisions to circumvent this process, the OSC is unable to consider your request for a regulatory review of your matter.” This from a letter to an abused investor dated Aug 25, 2004. They give a similar answer today, as does each of the thirteen provincial and territorial securities commissions, despite them being the statutory body charged with this duty. They brush it off.

Here is what the IDA (what todays Industry body used to call itself) claimed in 1998:

"The IDA is Canada's only national entity with delegated responsibility for securities regulation and investor protection." - Joe Oliver former president of Investment Dealers Association, 1998 Evidence given before theSenate Standing Committee on Banking, Trade and Commerce

Here is what the IDA’s Paul Bourke said to the Financial Post in 2004:

"First, let's get the facts straight. The only legislative power the provincial governments "delegate" to the IDA is registration of brokers -- and even that is only delegated in B.C., Alberta and Ontario. The provincial governments do not "delegate" securities industry compliance and enforcement." Nov 3, 2004

"The IDA is a private organization and can set its own rules."Financial Post May 9, 1999."...the IDA is not an arm of the government. We are not acting as an agency or a delegate of the securities commission."This from former IDA legal counsel Brian Awad National Post Newspaper titled “IDA called on constitutional grounds”

It appears that the relationship between the provincial securities commissions and those self regulatory agencies employed by the Investment dealers and also by the mutual fund dealers is a very confused and troubled, but incestuous one. They are in bed together, and the stories of the affair do not match each others version.

Need more convincing that the provincial regulator may be bought and paid for?

From Alberta Auditor General report“ASC is the industry-funded organization responsible for overseeing the capital market in Alberta. It administers the Alberta Securities Act, the Securities Regulation and Securities Commission Rules.”sourceReport of the Auditor General on the Alberta Securities Commission’s Enforcement System

The Alberta Securities Commission collected some $24 million in fees in 2009, (source Alberta Securities Commission 2009 annual report) some of those fees no doubt came from the unique and interesting practice of selling exemptions to the law as described above, our Securities Act. Did you read that correctly? I will repeat it just in case you missed it. They collect money for giving financial firms “hallway passes” to skip out of having to follow our provincial laws! There are several thousand investments and investment companies who have paid money to your government protective commission, and purchased permission to violate the laws. This list can be found at any securities commission in the country by searching the word “exemption”. How would you feel if your Food Inspection Agency were knowingly allowing tainted and defective food to be sold? How would you feel if your Health Agencies were earning “fee income” from granting drug companies the right to spread infection? Your provincial securities “regulator” is doing something very much like this, and has done so several thousand times without so much as a peep of honest and transparent disclosure. This is not honest services and if looked at carefully, it may not even be legal.This is the second shoe I told you I was going to drop on you, earlier on in the article. The second conspirator in being able to commit the perfect “reverse” bank robbery.

Need a very specific example or two?

The Alberta Securities Commission granted “approximately twenty investment firms” (Source, Alberta Finance and Enterprise) the right, for a fee, to sell tainted and toxic subprime mortgage investments, called Asset Backed Commercial Paper. Honest disclosure would call them Liability Backed Commercial paper but that shows just how easily the securities commission can be fooled into subservient compliance to the finance industry. There was no public debate on whether laws should be violated for these particular companies, nor for these particular investments. This was done behind closed doors. There was no public notice given that certain investments were being sold into our economy while not meeting our laws........or did they meet our laws once a legal exemption has been purchased? Or were they illegal investments that had somehow been made “legal” on paper, but not in actual substance? It matters not, they are your problem, not ours. What matters is that the crime is perfect if you have bought a pass to make that which was illegal, legal. You cannot lose.

They are $32 million worth of a problem for the City of Lethbridge. They are $18 million worth of a problem to the University of Calgary who were probably told by an investment person, that these were top rated, safe investments. I suppose the legal exemption needing to be met because they were precisely the opposite of top rated and safe, was forgotten in the zeal to make an $18 million dollar sale. Understandable in light of the excitement. Can you imagine what a used car salesman would tell you in order to make an $18 million dollar sale? Now apply that to a guy with a 90 day securities course and you pretty much have the picture.

The Alberta Treasury Branches were in a position of failure by having placed nearly half (47%) of each and every dollar of deposit that they held into these toxic investments. Source Report of the Auditor General of Alberta, http://www.oag.ab.ca/files/oag/Oct_2008_Report.pdf The irony here is that Iris Evans is the Finance Minister in charge of the ATB, which nearly failed under her watch, by being infected with toxic investments which were allowed by the ASC, another agency under her watch.

Our economy was infected with a known toxic product, which the financial firms in Canada wanted to dump, knowing that they were not up to par? Securities Commissions are and have been “hesitant” to investigate this crime due to their part in approving the stuff. They are starting to come around, now due to a public awareness campaign by a small group of investor advocates. How am I so sure they knew in advance they were crap? Because they had to apply for an exemption to our securities laws in order to sell them. They had to put in writing the exact shortcomings of these investments. They had to file an application to exempt, which in itself is an admission that these products did not meet the law.Why did the securities commission grant this permission to sell crap into our economic food chain. Here is the exact wording which grants the decision to grant them this permission from thirteen provincial and territorial securities commissions:

“Each of the decision makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met”.

In other words “we have no freaking clue what we are doing but our salaries (at the securites commission) are approaching $200,000 and we will go along with whatever we are told to do by the people that pay these great salaries”. (authors interpretation)

The Saskatchewan Financial Services Commission even has a booklet on their web site called “How to Raise Capital Using Exemptions”. It indicates how to approach and work with the SFSC to assist in selling securities in Sask that need a little help going around the law.

I could dwell on this a bit further, and may come back to it, but I have to digress just a little to further look into a favorite word at the securities commission. “Decision”.

In the case of retired Calgary firefighter Gordon Simpson, who had a bad experience with his investment dealer, and made a complaint to the Securities Commission. He was told by this crown agency to go elsewhere, that he had to take his complaint instead to the industry sponsored investment dealers association. An industry trade body that we have already looked at and the supreme court of Canada has decided that this trade body “does not owe a duty of care to the public. Only to their own members. Of course Mr. Simpson’s case was dismissed by the IDA, as most often happens when you take any complaint to the very association of members of which you are complaining. He appealed this “decision” by the IDA. Guess what? His appeal was denied. They would not even hear his appeal. There were two strange reasons given. One is that the IDA has their own special meaning for the word “decision”, (like Bill Clinton does for sexual relations) and they say this to Mr. Simpson, “a refusal to carry on with investigating a complaint was not actually a “decision” and therefore could not be appealed”. In further argument, they say further that “Therefore, not every decision meets the definition of “decision” for the purposes of the Act.”

In case that logic was not bulletproof enough, they had a backup reason to go with. Another reason given for not allowing Mr Simpson to appeal the brush off decision was that Mr. Simpson was “not a party directly affected by the decision” not to pursue his case and therefore he was not allowed to appeal. This is the second time I have heard the investment dealers association pull this excuse out of imaginary lawyer land......they gave the same foolish logic to a Mr. Jim Roache of Ottawa when his case also was dismissed out of hand. Mr Roache is quoted as having said, “if I was not a person directly affected by this, who the hell was? It was my savings, my retirement, my failed marriage.......” The Investment Dealers association was unable to grasp this simple logic (something about $200,000 salaries) and they were unable to answer Mr. Roache.

Where was I, now that I have gotten the “decision” thing off my chest? Oh, we have covered how the securities commission appears to be doing a one sided job of refereeing the relationship between the public and the investment dealers. We have confirmed that this referee is indeed paid by the investment dealer side of the relationship, and that they (securities commission) refuses to deal directly with the public. They will, however take money from, and deal directly with any industry player who wishes to violate the laws and place the public at harm. Thanks. You guys are awesome!

Where do we go from here? Need a few more examples? A few hundred more? How about several thousand? What will it take? I have submitted documents into the legislatures of several provinces and into Ottawa, with two “poster child” cases of knowingly abusing the public trust with legal exemptions, and with a failure by the Alberta Finance minister (and the Finance Minister before her) to rein in this abusive behavior. I have requested a provincial inquiry under the provincial inquiries act, but that would mean that the Alberta government would have to investigate themselves. What odds do you give that the Alberta government is honest enough, and transparent enough to look into its own participation in doing billions of dollars of damage to Albertans and to our economy? How about the other 13 governments involved? Any bets?

I am getting ahead of myself. I was still focused on the securities commission in Alberta, fighting for their very lives (salaries) against the threat of a national securities commission. What would they possibly do to earn salaries as high as $700,000, if their jobs were taken away. Who would print all the paper? Who would do the job of not protecting the public, while strenuously claiming to protect the public?

These agencies will tell you that they have changed, that they have seen the light and they are new and improved. Each year and each scandal they tell us that. Certainly they have changed some names, some have even changed the name of the organization (The Investment Dealers Association having split it’s lobby group apart from the regulatory side, The Investment Industry Regulatory Organization Of Canada IIROC). Perhaps some of this change is true. It is my belief that these organizations are not coming clean, not admitting wrong in any case, and simply making optical moves to appear clean. They continue every day to violate the public trust and sell off the public interest in favor of their own interests. It is your financial future at stake. Your economic health. Are you willing to place it entirely at risk to foxes and lawyers who pay themselves hundreds of thousands to do things like this?

A few years back the Alberta Auditor General was trying to do an audit of the Alberta Securities Commission. There were allegations of two tier treatment, one for the rich and powerful, and another for the rest. There were ASC employees who were attempting to come forward to tell of this. There were stories of blow up sex dolls in the ASC office, and an atmosphere that was simply inappropriate. Did the ASC submit willingly, as does a group that has nothing to hide? No. They paid about $1.2 million in legal fees to challenge the right of the auditor to audit this crown agency. After a lengthy debate, the auditor was finally allowed to do his job, and he found a systemic failure to follow practices and procedures of any kind in too many cases. They failed. To add insult to injury, they fired a few of the very people who were trying to help the public interest and tell the truth about the commission. Those people violated the industry code of silence, which says that your loyalty to your employer must always take priority over your loyalty to the public interest. No leaks. No losses.

The top person at the ASC earned in excess of $700,000 last year. (source 2009 annual report of ASC). At the Ontario Securities Commission there were at one time some 90 employees who EACH were earning more that the very top man at the SEC in the US. These salaries paid by the very industry that they are purporting to regulate. In my opinion and experience they are paid this much to say “yes” to the industry. Is it impossible to imagine that this government regulator would become overly influenced and biased by this lucrative arrangement? At the very least it does not follow a process of best practices.“With 90 OSC employees making more than the chairman of the SEC, it’s time to look at the Ontario securities regulator’s performance and accountability Its chair and just one of its vice-chairs together make more than all five members of the U.S. Securities and Exchange Commission combined, including SEC chairman Christopher Cox” http://finlayongovernance.com/

Studies of the enforcement activities of US and Canadian securities regulators and police tell us that the USA did over 600 times more prosecutions than done in Canada during the same time period. Source Canadian Business Magazine Editorial Board, Aug 2007. For the time period 2002 to 2007.

Financial penalties are 10 times higher in the United States than the average Canadian fine. Source Prof P. Puri, Osgood Law School of Canada.

In the US fraudster Bernie Madoff was found guilty and in jail within 6 months. Jailed for 150 years. In Canada, by contrast, Livent Inc. founders fraud trial took the Canadian system eleven years. Six months verses eleven years. Conrad Black had to be prosecuted in the US despite his Canadian background and business interests.

When a broker is fined in Canada by the Investment Dealers self regulatory body (IDA, IIROC, whatever comes next) you will be surprised to learn that the dealership body keeps the money. That is correct, they keep it for themselves. The victims get nothing. I suppose it helps pay their salaries. While at the Ontario Securities Commission, the vice chair Susan Wolbergh Jenah earned $446,000 according to OSC filings. Here she signed exemption orders allowing toxic investment paper to violate securities laws and be sold, which we have talked about earlier. She then jumped ship, and moved to the investment industry self regulator, earning some $700,000. In this capacity she then made the announcement that most investment dealers did not understand this toxic investment paper that they were selling (headlines Oct 2008 lethbridge herald and national). It is ironic that she herself signed the paper allowing these products to be sold in Canada, and then with a doubling of her salary, she then learns that this product she exempted was not understood. It makes me wonder if we double her salary again, to $1.5 mil, what would she then say? I makes me wonder how much money it would take for a public officer to do the job of protecting the public and ignore for a moment the focus on simply protecting ones job. It is also ironic, that I find that the more a person is paid, the greater the likelihood that they will instead act to protect their own livelihood. Strange beast this capitalism that I have worshiped for so long. Time for me to grow up, and move beyond the sandbox mentality that only knows three words, “me, mine, more”.

Where was I? Yes, we were looking at how new and improved these regulatory agencies and self regulators are, and how proactive they are at keeping ahead of the white collar crime curve. Compared to Europe, Australia, and USA, they are at least ten to twenty years late and a few billions short. But hey, the good news is that they are earning a good salary to protect us from crooks.Where are the regular police agencies when fraud, forgery, negligence, breach of trust and other occur? They are busy with the criminal code, and not very involved with our securities act. They too, are believers that the securities people have things under control. Needless to say, the securities people take care of their own, and rarely even refer criminal offenses to the real police. The RCMP has had a few of these regulators and self regulators join the force, (while keeping their six figure salaries) as volunteers, so some of these financial people have actually infiltrated the RCMP commercial crime unit. This quote from a senior RCMP investigator when asked

“Unless the matters you are concerned about are referred to the RCMP IMET through one of our participating agencies (OSC, IDA, MFDA,MRS) it will not be considered for investigation.”

Are you beginning to see how “perfect” this system is for getting away with anything?Remember, shhhhhh. Code of silence.These investment regulators have truly infected our entire system. They have taken over. I have spoken to many financial victims who have gone a few years trying to solve their financial abuse, and they agree it is almost similar to a hypothetical situation: imagine your local police agency decided to lower their work load, and they “designate” the Hells angels as the “self regulatory” body capable of policing all cocaine and prostitution offenses. After all they are the largest market participant. That would be a very logical “decision” according to some of the self regulators I know of. Then when you have suffered a crime by any drug user, and you go to the police, they would say something like the ASC does, “we have recognized the Hells angels as the regulatory body in this area, and thus we are unable to process your complaint and we ask that you contact the Hells Angels in this matter.............” Off you would go, to try and have your problem resolved by the self regulator. If they get your money, or your property back from the druggie that stole from you, do you think the Hells angels would keep it?The investment dealers do.

Top industry experts across Canada are calling for a national Securities Crime unit. The RCMP is truly incapable of doing the job. In 200? They were on record of having a full caseload with only 8 cases. By 2007 they had only one prosecution in canada while during the same period the us authorities had over 1200. This national securities crime unit would include investment experts, and might be expected to owe a loyalty only to the public, and not to the very criminals they are investigating. They would certainly not be allowed to be paid by those they are investigating, as is today’s system. A proceeds of crime funded agency could operate with very little public cost. The sooner we get started towards “best practices”, the sooner the stealing of your economic efforts will begin to slow.

We have looked at the crooks, the cunning and clever financial manipulators who manage to steal about half of the economic production of the entire financial system and investment returns the average man is hoping to live and retire on. We have looked above them to the self regulators who are hired and paid by these very people. We have gone up a level to the government regulators who we find, amazingly are also funded by the industry. The only area left untouched in this expose is the role of Purdy Crawford, a private industry lawyer, and why he became the head of the $32 billion dollar restructuring plan, with no government regulators in sight. Another day. Another story.

Where does the buck stop? With your finance department or attorney general who is usually in charge of each provincial securities commission? I have asked Iris Evans of Alberta Finance, in addition to the ASC, for years now, to answer a few questions, if they can, for the benefit of a confused public:

In what public interest are the legal exemptions that were granted to the “twenty” firms selling ABCP , and to mutual fund companies, who applied for and received a legal exemption to “rebate” or “kickback” commissions while they worked diligently to switch clients from independent mutual funds to their own house brand. Two simple case studies out of thousands of legal examples of breaking our laws. These two deserve a public inquiry. I wont say trust me because that saying is usually reserved for people who are NOT to be trusted, but believe me if you will, there are two case studies that will shock and amaze you. What public interest is served by exempting the laws Mrs finance Minister? What public input or debate was allowed (or why not) into these permissions to violate our laws prior to them being granted?What public notice was given (or why not) to those people or organizations to warn them prior to purchaseWhere is the public inquiry into these matters? Where is the honest disclosure and transparency, or will we have to take your word that everything is fine?Can you please protect the public in these matters, or will we continue to see protection of the possible crimes, the regulators and politicians in these matters?

So far our finance minister in Alberta (and every other province in the country) cannot answer these simple questions.

Not even Las Vegas lets people count the money unsupervised. Canadians, wake up. This country is your casino. Each person in this country owns a slice of ownership of this great economy of ours, good, bad or otherwise. If it fails, you fail. If it suffers, you suffer. And we are allowing clever, powerful folks to count the money unsupervised. I am here to tell you that they are putting as much as they possibly can in their pockets. It is documented. It is part of the public record. It is something that they can and will refuse to investigate. They win, we all lose.

Get financial minds out of the game of pretending to police themselves.Or, if your tastes run to riches without morals, get yourself a suit and tie, and commit your crimes within the jurisdiction of the Securities Act of any province. The police will never even know about it. The Criminal code of Canada is for pickpockets and small change artists. The real money is made within the securities game. We own each and every referee in the game.

At the beginning of this article I asked the question.If I wish to rob a bank, I am subject to the criminal code of Canada.........but if a bank wants to rob the public, what are they subject to?Answer?Nothing. No police will come. No commission will raise an eyebrow. No regulator exists in Canada that is not paid by those very banks and financial companies. No self regulator exists that does not represent the interests of its members over the interests of the public.That is my experience. I have twenty years inside the industry, and nearly thirty now studying it from within and without.

Tell your provincial MLA to conduct a public inquiry into the two case studies, as well as the thousands of other times our laws have been hijacked. Your very economic health depends upon it.Case study # 1 is titled “Commission kickbacks lead to an $800 million dollar windfall”Case study #2 is titled “How to steal $32 billion dollars and not get caught”

Larry Elford is a former financial broker, and former CFP, CIM, FCSI, Associate Portfolio Manager, now retired, who left the industry after being unable to associate with the corruption involved. He documents what he experienced at http://www.breachoftrust.ca and counsels victims of financial abuse free of charge through http://www.investoradvocates.ca

The first crime is the actual abuse of trust, whether it be a financial advisor taking advantage of his client for personal gain,, child abuse, malpractice, embezlement, bribe, whatever.

The second crime is the cover up, involving individuals of considerable power or influence who were not involved personally in the initial wrongdoing, but whose sense of loyalty is stronger than their attachment to honesty and openness. Since exaggerated loyalty may be the very quality that gives such people power and influence (think Liberal party hacks and Adscam), it is hard to know what can be done about loyalty as self serving weakness.

The third crime is the hoodwinking of police and the public with false assurances that all is well.

On second anniversary of collapse, rating agency cuts debt four grades

John Greenwood, Financial Post

Published: Thursday, August 13, 2009

DBRS has significantly chopped its rating on some of the $32-billion ofrestructured asset-backed commercial paper, dealing another blow to hopesthat the holders of the debt may one day get their money back.

Citing the recent failure of a string of corporations linked to the bonds,DBRS said there has been a "rapid deterioration" in the credit quality ofsome of the underlying assets, resulting in "higher probabilities ofdefault."

The downgrade, issued on Tuesday, comes days before the two-year anniversaryof the failure of Canada's ABCP market on Aug. 13, 2007, which leftinvestors ranging from individuals to the Ontario government and the Caissede depot et placement du Quebec, the biggest holder of the paper, unable tosell notes they believed were as liquid as cash.

"This stuff is trading like junk paper anyway, but this is not good forinvestors," said a bond trader who asked not to be named. "This definitelylowers the value."

DBRS lowered the A2 notes issued by the MAVII trust to BBB (low) from A andwarned of possible further downgrades.

After a marathon 18-month restructuring process, investors swapped theirstalled ABCP for new bonds in January, but almost from the start the badnews has been piling up. In April, the first scheduled interest payment ofabout $11-million had to be diverted to cover administrative costs, leavinglittle or nothing left for investors.

The new notes are set to mature around 2016, but it is far from certainwhether investors will get their money back, since their value is basedprimarily on structured credit investments such as CDOs and credit defaultswaps linked to companies that have fallen on hard times.

In its downgrade, DBRS referred to five of the companies linked to thebonds, including Lehman Brothers Holdings Inc., Freddie Mac andAbitibi-Consolidated Inc.

Observers say only a limited secondary market has developed, with even thetop-quality notes trading at less than 50¢ on the dollar.

As part of the restructuring about 1,800 retail investors have got backtheir money, but the lion's share of the $32-billion is held by companiesand institutions that had no choice but to take the new bonds.

Perhaps the most controversial aspect of the deal was a clause -- approvedby an Ontario Superior Court judge -- giving legal immunity to the banks andinvestment firms that manufactured and sold the ABCP.

While the market for ABCP froze up around the world, only in Canada did thebanks that agreed to provide emergency liquidity decline to step up, leavinginvestors on the hook.

What still rankles many investors are reports that investment dealers andother major players were aware that the market was in trouble before it fellapart but continued to sell the notes.

"The real loser in all this is the average Canadian, like the millions ofQuebecers who rely on the Caisse de depot for their pensions," said BrianHunter, a retail investor who got more than $600,000 of his savings back.

Mr. Hunter said Ontario residents will likely have to pay for the nearly$1-billion the province invested in ABCP.

"At the end of the day it's the taxpayer who's going to have to pay for it,"he said. "At the end of the day, somebody took $32-billion and they got awaywith it."

news release on regulators looking into ABCP sales, followed by investor advocate comments/predictions......

From: Advisor.ca July, 2009National Bank Financial and Scotia Capital are among the bank-owned investment dealers being investigated by four of the nation's financial regulators.Securities commissions in Ontario, British Columbia, Quebec and the Investment Industry Regulatory Agency of Canada (IIROC) are engaged in settlement discussions with a number of brokerages about their involvement in creating a market for ABCP despite learning about the liquidity crisis set to unfold with the elaborately structured financial instruments.Central to the probe is a memo, dated July 24, 2007, by Judi Dalton, managing director of debt capital markets funding, warning a small group of investors of Coventree's exposure to U.S. subprime mortgages, and sent just weeks before the ABCP market was seized.The memo was sent to representatives of a number investment dealers, including Scotia Capital, National Bank Financial and RBC Capital. Regulators claim the memo served as an early warning sign, and have been examining the bank's inventory of these shaky commercial papers before and after receiving the memo.However, a large portion of the millions of dollars expected from the settlements and administrative hearings isn't expected to compensate investors.Since the ABCP crisis, some investors have been reimbursed through a Pan-Canadian agreement — a privately negotiated restructuring that involves federal and provincial government money.Settlement talks between the regulators and banks are ongoing. If a settlement isn't reached by the end of the summer, a hearing before a panel of adjudicators could be scheduled for the fall.Meanwhile, Coventree, a key player in the ABCP market, is shutting down its operation.

No money likely to go to victims. Settlements are most often kept by self(ish) regulators.No effective punishment likely to deter future events, salaries of all regulators involved in this are paid for by those that they are investigating, with fairly predictable results.No ability to sue and gain compensation that way, as the right to sue for damages has already bee taken away from all victims of this crime in a fairly convoluted restructuring plan that accomplished this bit of self protection.Lets add up the score and see where we are at.Deception to sell the products in the first place. (“trust me, this is safe stuff”.....says the salesman who claiming “advisor” status on his business card)Legal exemptions granted to allow toxic investments into our economy. (it was NOT safe, from the beginning and all parties knew it, except of course the buyers)Protection from lawsuits granted to the perpetrators of this. (Thanks to the cleanup efforts of Purdy Crawford) (didn't he do a similar "cleanup" job on tobacco smuggling charges?"Financial meltdown of the economy and of economic confidence a result. (you did not need a strong economy did you?.........sorry)No charges so far. Fraud, negligence, breach of trust not under investigation by the any bona fide police agency. (remember, we police ourselves in the financial industry)Investors transfer $32 billion worth of wealth to the pockets of the richest organizations in Canada. (enough said)The referee’s (regulators and self regulators) are paid by the financial institutions. (Guess who wins the game?)Financial institutions in Canada are involved in a regulatory love fest, while the public simply gets screwed........again.To the regulators whose salaries are paid by those very banks you are investigating........"please step up your game and prove me wrong."

1. first is the fact that if there are any fines, settlements or payments paid by the banks over wrongdoing found in this case, that NONE of the money will go to customers like the city of lethbridge or others. 100% of the funds are typically kept by the regulator, or as one writer said to me, "it is like the police calling you and telling you that, "Hey, the good news is that we found your stolen car, but the bad news is that we are keeping it".

2. As part of a failed attempt to get their money back, all ABCP investors had to vote on a restructuring package that included the clause that they could not and would not sue anyone, for anything, over this failed investment in ABCP. This restructuring vote passed and yet investors still did not get their money back as promised. Lawyers for the restructuring had to go hat in hand to Alberta, and Federal Governments to get a bailout package before smaller investors were compensated. The item of interest here is that people like the city of lethbridge etc, now have no legal recourse to get this money back EVEN IF the National bank that sold it to them is found to have done them wrong. Strange.

3. In an even more bizarre side note, the man (Purdy Crawford) who negotiated the restriction of those legal rights, (and tried to negotiate a restriction from prosecution as well into the deal) is the same guy who negotiated Imperial Tobacco out of cigarette smuggling charges that cost them a billion dollars in fines. He is like a mafia cleanup man who goes in after corporations do very bad things, and he then tries to get them of the hook or keep them out of jail. Very strange that no securities police, regulators, rcmp, treasury department in canada was involved, but instead this private cleanup man lawyer.

#3 is way strange and possibly incomprehensible to most people without a ton of background, but #1 and #2 are examples of pure financial abuse by system designed to win at any cost, and they are some of the reasons I call for a change to the entire system

Briefly: "Dealers probed for ABCP" and more of Friday's newsStaff / July 24, 2009from www.advisor.ca

National Bank Financial and Scotia Capital are among the bank-owned investment dealers being investigated by four of the nation's financial regulators.

Securities commissions in Ontario, British Columbia, Quebec and the Investment Industry Regulatory Agency of Canada (IIROC) are engaged in settlement discussions with a number of brokerages about their involvement in creating a market for ABCP despite learning about the liquidity crisis set to unfold with the elaborately structured financial instruments.

Central to the probe is a memo, dated July 24, 2007, by Judi Dalton, managing director of debt capital markets funding, warning a small group of investors of Coventree's exposure to U.S. subprime mortgages, and sent just weeks before the ABCP market was seized.

The memo was sent to representatives of a number investment dealers, including Scotia Capital, National Bank Financial and RBC Capital. Regulators claim the memo served as an early warning sign, and have been examining the bank's inventory of these shaky commercial papers before and after receiving the memo.

However, a large portion of the millions of dollars expected from the settlements and administrative hearings isn't expected to compensate investors.

Since the ABCP crisis, some investors have been reimbursed through a Pan-Canadian agreement — a privately negotiated restructuring that involves federal and provincial government money.

Settlement talks between the regulators and banks are ongoing. If a settlement isn't reached by the end of the summer, a hearing before a panel of adjudicators could be scheduled for the fall.

Meanwhile, Coventree, a key player in the ABCP market, is shutting down its operation.

Mr. Greenwood identifies the margin funding commitment fees payable to several banks and governments as a contributing factor to the interest shortfall suffered by holders of restructured notes on the first interest payment date.

He characterizes the commitment fees as "significantly higher than the market rate," and "exorbitant" (the suggestion being made that the Investors Committee that I chaired agreed to "exorbitant" bank commitment fees in order to get lender support for the restructuring). In addition to various factual errors (which I won't focus on here), I am sure there must be some misunderstanding and believe it best to correct the record.

In March, 2008, when the original deal was struck, the negotiated margin funding commitment fees represented approximately one-third of the then-prevailing market rates. Indeed, in numerous public statements and documents, it was stated quite clearly that the margin funding facilities were made available at a cost considered to be below prevailing market prices for these types of lending facilities (could such lending facilities even be arranged with third parties in the then-current economic environment).

Today's market rates are likely more expensive than those of March, 2008. The margin funding fees payable by the restructured trusts ought properly to be characterized as dramatically below market.

As I expressed publicly many times during my 18-month tenure as chairman of the Pan-Canadian Investors Committee for Third-Party ABCP, I believe we negotiated a great deal for the investors at the time and I firmly believe that remains equally true today.